ABBOTT SAYS PROFITS INCREASE 3.6%

Bruce Japsen, Tribune Staff WriterCHICAGO TRIBUNE

While Abbott Laboratories waits for the payoff from recent acquisitions and increased research spending, the North Chicago-based maker of medical products reported Tuesday that first-quarter profits rose a meager 3.6 percent.

Abbott, a manufacturer of drugs, hospital products, diagnostics and baby formula, reported earnings of $693 million, or 44 cents a share, for the first quarter ended March 31. That compares with $668.7 million, or 43 cents a share, in the first quarter of 1999.

Revenues rose 1.2 percent to $3.35 billion from $3.31 billion.

The results were in line with Wall Street estimates. Abbott shares closed Tuesday at $38.06, up $1 in New York Stock Exchange trading.

"It was a weak quarter in terms of revenue growth, but that is pretty much what everybody was expecting," said Sarah Ross, an analyst with Edward Jones in St. Louis.

Total profits and revenues were flat, in large part because Abbott's drug sales fell 2.7 percent in the first quarter. Pharmaceutical sales totaled $607 million, down from $624 million in the year-earlier period.

Abbott acknowledged softening sales in the drug division, citing competition from the recent introduction of a generic version of Hytrin, a hypertension drug that has historically generated $500 million in annual sales.

Abbott, under Chief Executive Miles White, has been trying to restore double-digit sales growth to its pharmaceutical sales division through several acquisitions, joint ventures and marketing agreements negotiated in the last year. White replaced Duane Burnham, who retired in January 1999.

The company will not begin to reap revenue from those deals until the third and fourth quarters of this year, analysts said.

"I think they are laying the groundwork for an improvement over the next few months," Edward Jones' Ross said.

Furthermore, Abbott said the company increased overall research and development spending by 19.2 percent in the first quarter to $321 million. By comparison, the waning years of the Burnham era saw a total R&D spending decline and fewer drugs in the development pipeline.

"We grew our research and development investment significantly during the first quarter due to an increasingly promising internal pipeline and several external opportunities," White said in a statement.

"We will continue to aggressively seek these initiatives, preparing Abbott for accelerated growth in the future," he said.

The dry pipeline and a host of problems last year have contributed to a decline of more than 20 percent in the price of Abbott's shares in the last year and the company has not had the impressive profit growth--in the mid-teens--to which investors had become accustomed.

Abbott last year paid a $100 million settlement to the Food and Drug Administration to resolve complaints about manufacturing practices in the company's diagnostics division. As part of the settlement, Abbott agreed to suspend selling some diagnostic test kits until all manufacturing flaws were resolved at its north suburban plants. Abbott has not said when that will be.

Meanwhile, worldwide diagnostic product sales were down 1.1 percent in the first quarter, to $708 million from $715 million a year earlier.

Abbott said diagnostic sales were down 3 percent because of the effect of the stronger dollar.